20 Private companies

Private companies

Section 15(1) of the Act states that a company having a share capital may be incorporated as a private company if its memorandum or articles –

(a) Restricts the right to transfer its shares

(b) Limits to not more than 50 the number of its members (counting joint holders of shares as one person and not counting any person in the employment of the company or its subsidiary or any person who while previously in the employment of the company or its subsidiary was and thereafter has continued to be a member of the company;

(c) Prohibits any invitation to the public to subscribe for any shares in or debentures of the company; and

(d) Prohibits any invitation to the public to deposit money with the company.

The ownership in a private company is private. It is private because Section 15(1) of the Act restricts its rights to transfer its share to the general public.

A private company does not need to meet the strict requirements of SC and the Bursa.

Private companies may issue shares and have shareholders. However, their shares do not trade on public exchanges and are not issued through an initial public offering. The shares of private companies are less liquid and their values are difficult to determine.

Transfers of shares in a private company are regulated by the provisions stated in its Articles of Association (AA).